Lukoil buys into Congo block for $800 mln

Russia’s Lukoil finalised an acquisition with New Age for its 25 per cent interest in the Marine XII license in the Republic of Congo for $800 million.

The Eni-operated licence covers four blocks, including the giant Nene field which came onstream in 2015.

The Marine XII license covering 571 square kilometres and is located on the continental shelf of the Republic of Congo 20 km from the shore with the sea depth of 20-90 meters. It covers five discovered fields containing 1.3 billion barrels of oil equivalent of proved and probable (2P) reserves according to international independent auditor.

Two fields, Nene and Litchendjili, launched in 2015, currently produce 28 thousand barrels of oil (mainly light and low-sulfur) and gas condensate per day, and 1.7 million cubic meters per day of marketable gas.

The Marine XII license is based on a production sharing contract. Eni is the project's operator with a 65 per cent stake. The project also involves the state company Société Nationale des Pétroles du Congo with a 10 per cent stake.

"Entering this project is in line with our M&A strategy,” said Vagit Alekperov, president of Lukoil.

“The project is characterised by explored reserves, substantial production growth potential, access to well-developed infrastructure and it also fits our technological expertise. On top of that, the project is already free cash flow positive.”

Jean-Baptiste Bouzard, senior research analyst at Wood Mackenzie, said: “The deal consideration… represents a 36 per cent discount to our $1.26 billion valuation. This can be explained by NewAge’s well-known desire to sell and the development costs associated with complex reservoirs.

“The transaction adds production for the first time to Lukoil’s West African portfolio, and fits with the Russian company’s aims of developing its offshore expertise and grow its presence outside its Russian stronghold.

“For NewAge, the sale will free up resources to focus on Etinde in Cameroon, and replenish its exploration portfolio.”